If anyone had doubts about the importance of the voluntary carbon
market they would certainly have been overcome by the announcement last
month by Merrill Lynch of a new carbon offset service to assist
businesses to reduce emissions through voluntary offsets.

In partnership with ICF International, Merrill Lynch's new Green and
Gold initiative is the latest in a series of moves by major financial
institutions to position themselves in a market valued by Abyd Karmail,
Merrill Lynch's managing director and global head of carbon emissions
at over of $70 billion.

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Merrill Lynch intends to provide clients with the highest
sustainability carbon emission offsets and access to its full suite of
proprietary carbon finance products. Carbon credits offered include
those that meet the Gold Standard VER, Gold Standard CDM, and Climate,
Community, and Biodiversity Alliance (CCBA) standards which carry the
endorsement of leading environmental and conservation NGOs.

Merrill Lynch is but one of many major financial houses that have
entered this fast growing component of the carbon credit marketplace.

In 2007 Morgan Stanley, another global financial institution with
assets of nearly $800 billion, launched the world's first carbon bank,
with services that allowed clients to compile their emissions inventory
and calculate their carbon footprint using ISO 14064 standards. Morgan
Stanley's Commodities Group procures and cancels carbon credits
equivalent to a client's verified carbon footprint. By 2011, Morgan
Stanley will have invested upwards of $3.5 billion into the carbon
market, and expects very high returns when the current Kyoto Protocol
expires in 2012.

Barclays, one of the UK's leading financial institutions has been
involved in carbon trading since 2005. It was the first UK bank to set
up a dedicated carbon trading desk to help clients, and is one of the
most active players in the emissions trading market, having traded some
300 million tonnes as of 2007. As part of its own carbon neutral
strategy, Barclays also produces its own brand of high quality offsets.
So far Barclays has produced over 200,000 tonnes of its own tradable
carbon credits.

The Voluntary Carbon Market

Many are confused about the carbon trading market, and in particular
about the difference between the company carbon trading, and the
legislated carbon market. Only in Europe are large companies in
specific sectors mandated by law to buy carbon offset credits if they
exceed legal pollution limits. The European Union Emissions Trading
System (EU ETS)

Voluntary carbon offset trading comes stems from a variety of
sources - people trying to offset their carbon footprints, businesses
seeking to reduce their greenhouse gas emissions, or major events
trying to be carbon neutral, such as the Olympics, the Super Bowl, etc.

Carbon offsets can come from many sources. The "State of the
Voluntary Carbon Markets 2007”³ market report claims that the voluntary
carbon offset market is dominated by three types of projects: forestry
sequestration (36%), i.e. the avoidance of deforestation or the
planting of new forests; renewable energy (33%) - generating power with
clean, renewable sources (such as wind or solar) instead of dirtier
fossil fuels; and industrial gases (30%) - containing and storing the
emissions created by industry so that they are not released into the
atmosphere.

As noted earlier, the voluntary carbon offset market is expanding at
an astounding rate. According to 2007 report, the global voluntary
carbon market was worth roughly $91 million in 2006, with 23.7 million
tons of carbon dioxide equivalent (MtCO2e) traded. Trades in other
carbon-related financial products, such as derivatives and futures, are
also posting double-digit gains each year.

Enticed by the possibility of high returns, financial institutions
have flooded into the voluntary carbon market, working as carbon
”˜brokers' helping bringing integrity to the market and helping small
companies continue to participate in carbon trading. While heavily
polluting industries, particularly in the energy, cement, and metals
production sectors have experience with carbon trading (largely because
they are required to buy offsets in the EU-ETS, small companies can be
overwhelmed by the complexities of the carbon market.

This has created a demand for financial intermediaries to help
companies navigate the emissions trading scene while at the same time,
generating significant profits. Business leaders around the globe now
realize that going green is not an unbearable plight but rather a
win-win situation.

A derivative benefit of growing participation from financial
institutions in the carbon market is the establishment of market
integrity. The carbon market has always been susceptible to bogus
credits or double counting of credits. Such credits allow for an
increase in greenhouse gas emissions, as purchasers are able to emit
emissions that were never offset.

Acting as intermediaries, these financial institutions screen all
incoming credits against strict criteria and international standards,
before being passed on to clients.

"The market must continue to grow on a foundation of environmental
integrity," said Merrill Lynch's Abyd Karmali. "Demand in the rapidly
growing voluntary carbon offsets market is shifting towards emission
reductions that provide stakeholders with an independent guarantee of
environmental sustainability and credibility."

The GLOBE Carbon Registry, managed by the GLOBE Foundation of
Canada, takes this one step further. The GLOBE Carbon Registry, which
will be available in July of 2008, will ensure market integrity by
issuing a unique serial number to each posted credit, avoiding double
counting and allowing chain of custody control from creation to
retirement.

The GLOBE Carbon Registry will also record transactions of carbon
offsets that conform to internationally recognized or other
transparently described greenhouse gas quantification standards. The
registry will list which party (consultant and/or company) verified
each credit and to which standard it was verified. This will allow
purchasers to choose from the highest quality offsets, while
eliminating producers or verifiers of poor offsets.

Summary

Though still in its infancy, the voluntary carbon trading market is
one of the fastest growing markets on the planet. Although there have
been some growing pains, the increasing participation of some of the
world's biggest financial players is expected to smooth out the road
ahead and define the voluntary carbon market as an innovative model of
a market-based solution to global environmental problems.

The 'State of the Voluntary Carbon Markets 2007: Picking Up Steam'
is a comprehensive quantitative assessment of the voluntary carbon
market with information on prices and volumes traded, as well as an
analysis of current trends and buyer motivations. The report includes
data gathered from both buyers and sellers and offers a detailed
summary of the nature of transactions in the voluntary carbon sector
and predicted growth.